Comments Received from Market Participants in …...Comments Received from Market Participants in Response to the Review of the TSE Cash Equity Market Structure （Additional Material）

Comments Received from Market Participants in Response to the Review of the TSE Cash Equity

Market Structure （Additional Material）

May 2019

Note: TSE hereby certifies that to the best of its knowledge, the foregoing is a fair and accurate English translation of a document originally written in Japanese. In the event of any inconsistency between the original Japanese document and this reference English translation, the original Japanese document will prevail.

(Referential translation)

© 2019 Tokyo Stock Exchange, Inc.

The market structure (i.e. the 4 market segments), has been kept unchanged since the TSE-OSE cash equity market integration in 2013

2

Current Market Structure

The 1st Section （2,141）

For companies with high liquidity

Note: number in () shows the # of listed companies in each section as of April 2019

Standard （678）

Growth （37）

Private companies (unlisted)

Mothers（286）

For emerging companies

The 2nd Section （492）

For established companies

For various companies （Established/Emerging

Companies)

1. Issues Regarding the Current Market Structure （１）The Concept of Market Segments

Responses regarding market segment a. Roles and functions of the current market divisions are overlapping and confusing.

Number of IPOs

1st Section 2nd Section Mothers JASDAQ Standard（Growth） Total 2003 5 12 31 62 117 2004 8 14 55 71 164 2005 7 11 36 65 141 2006 13 16 40 56 162 2007 5 7 22 49 108 2008 2 5 12 19 47 2009 1 5 4 8 19 2010 4 2 6 10 22 2011 2 7 11 16 36 2012 2 5 23 14 44 2013 6 6 29 12（0） 53 2014 10 10 44 11（0） 75 2015 8 9 61 11（0） 89 2016 8 5 54 14（0） 81 2017 11 8 49 18（0） 86 2018 7 5 63 14（0） 89

※ Compiled by TSE (unless otherwise noted, the same applies to all information in this presentation) 3



Since the integration of the cash equity markets, many companies have listed on Mothers, and the 2nd Section

JASDAQ have continued to have some IPOs (No listings on JASDAQ Growth

after market integration)

Market Segment/ Number of years of

business 2nd Section

ＪＡＳＤＡＱ Standard

Mothers

Less than 5 yrs. 17% 7% 11%

5 yrs.～10 yrs. 5% 9% 32%

10 yrs.～15 yrs. 5% 22% 34%

15 yrs.～20 yrs. 2% 11% 13%

More than 20 yrs. 71% 51% 10%

(Average) 37 yrs. 24 yrs. 11 yrs.

（Medium） 38 yrs. 20 yrs. 11 yrs.

Number of years of business operation at the time of IPO （※１）（※２）

※１ After market integration in 2013 until Feb of 2019 ※２ Based on the date of establishment of the company on the record

4

Number of Years in Business at the Time of IPO



Listing Requirement for Emerging Companies (Comparison with other markets)

Mothers ＮＡＳＤＡＱ（Capital）ＨＫＥＸ（ＧＥＭ）ＳＧＸ (Catalyst)

shareholders 200 300 100 200

Tradable

shares

#：2,000 units

Market Cap.：0.5 bil.

Ratio：25％（※）

Common：# 1 mil. shares

① Tradable shares Market Cap. $1.5 mil. &

Shareholder equity $5bil. & business continuity 2yrs

OR

② Tradable shares Market Cap. $1.5 mil. &

Shareholder equity $4 mil.& Market Cap. $ 50 mil.

OR

③ Trasable shares Market cap. $ 5 mil. & Shareholder

equity 4 mil. & profit amount $ 0.75 mil. for the recent 1 yrs or 2 yrs of the

recent 3 years

Marekt Cap：30 mil.HK$

Ratio：25％ (basic) Ratio：15％

Shareholder equity

ー－ー

Market Cap. 1 bil.

① Market Cap. 0.1 bil.HK$ OR

② cash flow recent 2 yrs 20 mil. HK$

ー

ー

Profit amount or

Market Cap.

ー

# of years of

business operation

1 year 2 yrs ー

Public offering

500 Units ーーー

Other No False

Statements etc. Share price：$４, # MM：3

Recent 2 yrs, same management and recent 1 yr, no change in ownership

Sponsor

5

From websites of respective stock exchanges

（※）TSE Listing Rule “Definition of Tradable Shares “Securities Listing Regulations Art.2 (96) Tradable shares means shares excluding shares as prescribed by the Enforcement Rules as securities held by entities who individually hold 10% or more of the total number of such security, out of the securities pertaining to an initial listing application for or listed securities or any other securities, the circulation of which is poor (※e.g. person with special interest, such as directors, and issuer).


Responses regarding the current state of market environment for start-up companies b. Companies to be listed on the market.

05

101520253035404550556065707580859095

100

0 50 100 150 200 250

6

Capital Raised by Listed Companies (Mothers)

Average amount of capital raised at IPO on Mothers is about 0.5 bil. JPY

Number of companies

Amount of capital raised（0.1 bil. JPY）

Amount of capital raised at each IPO on Mothers

※ IPOs on Mothers from market integration in 2013 until end of 2018


Responses regarding the current state of market environment for start-up companies b. Companies to be listed on the market

※ 33 Sectors, numbers as of April 2019

Industry Sectors of Listed Companies (Mothers)

About 67% of the companies listed on Mothers are in the Information/Technology sector or the Service sector

7


Responses regarding the current state of market environment for start-up companies c. Listing opportunities for investment-intensive companies

【Other sectors（total # of companies 23）】

Other Financing Business, Whole Sale Trade: 4 each

Insurance: 3

Other Products, Machinery, Metal Products: 2 each

Foods, Precision Instruments, Warehousing and Harbor Transportation Service, Electric Power and Gas, Electric Appliances, Nonferrous Metals: 1 each

Mothers （# of companies 226）

JASDAQ （# of companies 57）

【Other sectors （total # of companies 8）】

Iron and Steel、 Precision Instruments、Foods、Securities and Commodities Futures、Chemicals、Pharmaceutical、Other Financing 1 each

8

Information/T

echnology, 14

Service, 9

Real

Estate, 8

Other

Products, 6

Wholesale

trade, 4

Retail Trade, 3

Electric

Appliances, 2

Construction,

2

Machinery, 2 精密機器, 1

食料品, 1 証券、商品先物

取引業, 1

化学, 1 医薬品, 1 その他金融業, 1

Service, 78

Information/

Technology,

76

Retail Trade, 24

Real Estate, 14

Construction, 6

Pharmaceutical,

5

金属製品, 2

精密機器,

1

非鉄金属, 1

（IPOs in 2015- 2018）

Industry Sectors of Recent IPOs

Many IPOs listed on Mothers and JASDAQ are in the Service or Information/Technology sectors



Number of Companies Unprofitable right before IPO

Number of IPOs at TSE （& number of companies that were unprofitable at the time of IPO）

9

In Japan, unprofitable companies account for about 4% of the total IPO companies from 2004 - 2018

（Such as ACSL, Delta－Fly Pharma etc.）

57

37 41

23 13

4 6 12 24

32 45

62 55 49

66 6

11

15 15 21

15 26

29 30

18

15

11 11 9

9

19

17

17 14 14

16

70

42 43

27

26

8 9

29

33

18

17

11

8 13

10

5 0 0 3 1 1 1 1 3 5 6 9

2 6

10 0

20

40

60

80

100

120

140

160

180

2nd Section

1st Section

JASDAQ Standard

Mothers

（Mothers - # of companies, unprofitable right before IPO）

Note：Including Technical listing

社数



0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

81%

Unprofitable at IPO

Profitable at IPO

10

24%

Ratio of Unprofitable Company IPOs in the U.S.

Tech companies are investment-intensive companies and therefore tend to be unprofitable (ratio increasing every year in the U.S.）

From University of Florida Prof. Jay Ritter IPO data



0

100

200

300

400

500

600

700

0

100

200

300

400

500

600

700

800

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Others Bio Tech Tech Average Capital Raised

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Other Biotech Tech

Recent average 20 bil. JPY

Excluding IPO by Visa in 2008

11

IPOs in the U.S.

Number of IPOs in the US and Capital Raised by Tech Company IPOs （from 2013 to 2018) Amount of capital raised

（0.1 bil. JPY)

In the U.S., about 60% of IPOs are tech companies（※）, average capital raised is about 20 bil. JPY

（※）Internet related, other technologies (including communications) and Bio Techs Number of companies

Ratio of Tech Companies for New Listings（1980 to 2018）

About 60%

From University of Florida Prof. Jay Ritter IPO data



Bio companies that do not meet the financial requirement

Introduced Listing Criteria for Good Quality, High Growth & Innovative Biotechs Requires Meaningful Investment from Sophisticated Investors the exchange determines who is considered a “Sophisticated Investor” (AUM,

investment experience, knowledge, etc.）

the exchange determines what is “Meaningful” （1-5% of total market cap., at least 1.05 bil. JPY）

※Market Cap. under 3 bil. HK$ 5%, 8 bil. HK$ 3%, others 1% ※Other requirements include, progress on the clinical trial (completion of Ph. 1, no objection from

authorities against Ph. 2 and onwards (clinical trial on people), more than 1 yr. of R&D and 2 yrs. of business, high market cap requirement (more than 21 bil. JPY), no change in core business, investment from outside more than 6 months prior to listing

Hong Kong

Life Science companies that do not meet the financial requirement

• In 2009, listing criteria for life science companies was introduced（※）（※）companies that engages in R&D of organic or life phenomenon based on Biology etc.

• Need to have investment from accredited Investors or Institutional investors more than 6 months prior to listing

※Other requirements include more than 3 years of R&D, high market cap (more than 24.3 bil. JPY) etc.

Singa-pore

Recent Rule Changes at Other Exchanges

In Hong Kong and Singapore, exchanges have listing criteria for investment-intensive companies (specifically, for Biotechs)

12 From Hong Kong Stock Exchange and Singapore Stock Exchange



Mothers 2nd Section

Number of shareholders

1st Section

Tradable

shares

Number of tradable

shares

Market Cap. Of

Tradable Shares

Ratio of tradable shares

to listed shares

Public offering

Number of years of

business operation

Profit amount or Market Cap.

More than 200 More than 800 More than 2,200

More than 2,000 units

More than 4,000 units

More than

20,000 units More than 5bil.

JPY More than 1bil.

JPY ―

More than 25％

More than 30％ More than 35％

More than 500 units

― ―

More than 1 year More than 3 years

― More than 1 bil. JPY

―（※）

Either a. or b. a. More than 0.5 bil. in the last 2 years

b. More than 50 bil. JPY Market Cap & 10 bil. JPY in sales

Item

Market Cap. More than 1 bil. JPY

More than 2 bil. JPY More than 25 bil. JPY

JASDAQ

More than 200

―

More than 0.5 bil. JPY

―

①More than 1,000 units

②More than 10％

―

More than 0.2 bil. JPY

More than 0.1 bil. JPY or market

cap. of 5 bil. JPY

―

Positive

―

Standard Growth

Listing Requirements (Quantitative)

2nd Section and JASDAQ (Standard) listing criteria focus on business track records For tradable shares, market cap. is the only listing criteria on JASDAQ

※Underwriters need to submit a document referring to the company’s business that has high-growth potential

13

Shareholder equity


Responses regarding the current state of market environment for well-established companies d. The appropriateness of listing criteria (liquidity etc.)

Main Markets （1st and 2nd Section）

JASDAQ

Growth

JASDAQ

Standard

A business is operated continuously and a

stable revenue base is present

1. Corporate continuity and profitability

There are no obstacles to continuity of

business activities

1.Business continuity

The company has growth potential

1.Corporate growth potential

A business is carried out fairly and faithfully

2. Soundness of corporate management

Corporate actions which cause market disorder are not expected

2.Reliability of corporate actions

Corporate actions which cause market disorder are not expected

2.Reliability of corporate actions

Corporate governance and internal management system are properly prepared and functioning

3. Effectiveness of corporate governance and internal management

system of an enterprise

Corporate governance and internal management system have been established in accordance with corporate scale and function effectively

3.Establishment of sound corporate governance and

internal management system

Corporate governance and internal management system have been established in accordance with the company’s stage of growth and function effectively

3.Establishment of sound corporate governance and internal management system

in accordance with the stage of growth

The applicant is in a status where disclosure of the corporate information, etc., may be carried out in an appropriate manner

4. Appropriateness of disclosure of corporate information, etc.

The company is capable of appropriately disclosing corporate details, etc.

4. Appropriateness of disclosure of corporate details, etc.

The company is capable of appropriately disclosing corporate details, etc.


Mothers

The listing applicant has developed reasonable and suitable business plans, and has developed the operating base necessary for executing such business plans, or there is reasonable expectation

that it will develop such operating base

1.Reasonableness of the business plan

The company is carrying out business in a fair and faithful manner

2. Soundness of Corporate management

Corporate governance and internal management system are developed in accordance with the size, corporate maturity, etc., of the enterprise, and functioning properly

3. Effectiveness of corporate governance and internal management

system of an enterprise

4. Appropriateness of disclosure of corporate information, risk

information, etc.

5.Other matters deemed necessary by TSE from the

viewpoint of the public interest or the protection of investors.


viewpoint of the public interest or investors protection.


viewpoint of the public interest or investors protection.


viewpoint of the public interest or the protection of investors.

Listing Requirements (Eligibility Requirements）

14


The company is able to make disclosure of corporate information, risk information etc. in an appropriate manner

Comply or Explain to all Corporate Governance Code

(All 78 principles)

Comply or Explain to Basic Principles of Corporate Governance Code (5 Basic Principles)



Foreign

Investors

62 %

（+1%）

Retail investors

14 % （-1%） Foreign

Investors

46 %

(+10%)

Retail

Investors

42 %

(-11%)

The 1st Section （mainly Foreign investors）

Mothers （mainly Retail investors）

JASDAQ （mainly Retail investors）

The 2nd Section （Retails/Foreign investors same ratio）

【Daily Average Trading Value】

3,023.4 bil. JPY （+257.4 bil. JPY）


97.2 bil. JPY (-13.7 bil. JPY）


44.9 bil. JPY （-6.6 bil. JPY）


74.4 bil. JPY (+1.8 bil. JPY）

Foreign

Investors

35 %

(+6%)

Retail

Investors

57 %

（-6%)

Foreign

Investors

37 %

(+9%)

Retail

Investors

54 %

(-9%)

Daily Average Trading Value & Types of Investors（2018）

Daily average trading value for the 2nd Section (2018): 40 bil. JPY

15 Daily Average Trading Value (Total of Auction and ToSTNeT market、Domestic shares only）（※）comparison to last year in parenthesis



0

100

200

300

400

500

600

700

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019.4

# Companies

Market Capital

Number of listed companies Total Market Cap. (tri. JPY)

1,191 Companies

2,141 Companies

Market Integration

Number of Companies Listed on 1st Section & Total Market Cap.

Number of Listed Companies on the 1st Section Market

IT Bubble Bursts Financial

Crisis

During the past 30 years, 1st Section listed companies have doubled


Responses regarding current market environment for companies listed on the 1st Sections e. The appropriateness of liquidity and governance structure etc.

16

Distribution of Market Cap. of Tradable Shares

Market Segment/ Market Cap. Of Tradable

Shares (JPY) 1st Section 2nd Section Mothers

JASDAQ Standard

JASDAQ Growth

Over 1 tri. 117 (6%)

1 (0.2%)

- - -

500bil.-1 tri. 106 (5%)

1 (0.2%)

- - -

100-500 bil. 416

(20%) 4

(1%) 5

(2%) 7

(1%) -

50-100 bil. 317

(15%) 9

(2%) 7

(3%) 8

(1%) -

25-50 bil. 346

(17%) 20

(4%) 15

(6%) 15

(2%) 2

(5%)

10-25 bil. 487

(23%) 93

(18%) 42

(17%) 86

(12%) 6

(15%)

4-10 bil. 237

(11%) 179

(35%) 89

(35%) 217

(31%) 9

(23%)

1-4 bil. 64

(3%) 193

(37%) 88

(35%) 316

(45%) 18

(46%)

Less than 1 bil. - 16

(3%) 6

(2%) 49

(7%) 4

(10%)

Total 2,090 516 252 698 39

17

Top: Number of Companies Bottom: Ratio

※ Data retrieved at the End of April. 2019




Market Segment/ Ratio Of Tradable

Shares 1st Section 2nd Section Mothers

JASDAQ Standard

JASDAQ Growth

More than 90% 700

(33%) 84

(16%) 22

(9%) 40

(6%) 9

(23%)

70～90% 616

(29%) 164

(32%) 32

(13%) 181

(26%) 9

(23%)

50～70% 468

(22%) 149

(29%) 72

(29%) 243

(35%) 8

(21%)

35～50% 264

(13%) 85

(16%) 68

(27%) 156

(22%) 10

(26%)

20～35% 35

(2%) 30

(6%) 56

(22%) 62

(9%) 2

(5%)

10～20% 5

(0.2%) 4

(1%) 2

(1%) 16

(2%) 1

(3%)

Less than 10% 2

(0.2%) - - - -

Total 2,090 516 252 698 39

18

Distribution of Ratio of Tradable Shares

18

More than

35% to list

directly on the

1st Section





Market Segment/ Market Cap. (JPY)

1st Section 2nd Section Mothers JASDAQ Standard

JASDAQ Growth

Over 1 tri. 134 (6%)

1 (0.2%)

- - -

500bil.-1 tri. 118 (6%)

- 1

(0.3%) 1

(0.1%) -

100-500 bil. 457

(21%) 4

(1%) 7

(2%) 9

(1%) -

50-100 bil. 341

(16%) 9

(2%) 16

(6%) 11

(2%) -

25-50 bil. 372

(17%) 34

(7%) 30

(10%) 33

(5%) 2

(5%)

10-25 bil. 453

(21%) 101

(21%) 75

(26%) 124

(18%) 6

(16%)

4-10 bil. 231

(11%) 184

(37%) 103

(36%) 230

(34%) 13

(35%)

1-4 bil. 35

(2%) 154

(31%) 53

(19%) 255

(38%) 15

(41%)

Less than 1 bil. - 5

(1%) 1

(0.3%) 15

(2%) 1

(3%)

Total 2,141 492 286 678 37

More 25 bil. to list directly

on the 1st Section

19

Distribution of Market Cap.



More than 1 bil. to

as criteria

for market transfer to the

1sat Section




Market Segment/ Foreign Investor Ownership Ratio


JASDAQ Growth

More than 90% 2

(0.1%) - -

1 (0.3%)

-

70～90% 4

(0.2%) 2

(0.4%) - -

2 (0.3%)

50～70% 35

(2%) 3

(1%) -

2 (1%)

7 (1%)

35～50% 173 (8%)

7 (1%)

3 (8%)

7 (2%)

7 (1%)

20～35% 497

(23%) 18

(4%) -

16 (6%)

23 (3%)

10～20% 616

(29%) 42

(9%) 2

(5%) 38

(13%) 61

(9%)

5～10% 362

(17%) 63

(13%) 6

(16%) 42

(15%) 76

(11%)

Less than 5％ 452

(21%) 357

(73%) 26

(70%) 180

(63%) 502

(74%)

Total 2,141 492 37 286 678

20

Distribution of Foreign Investor Ownership Ratio

20





Status of Nomination/Remuneration Committee Establishment

21



Number of Companies

Nomination Committee (Statutory / Optional)

Remuneration Committee (Statutory / Optional)

Number Ratio Number Ratio

1st Section 2,128 918 43.1% 970 45.6%

（+276） (+11.3%) （+265） (+10.7%)

2nd Section 493 75 15.2% 80 16.2%

（+28） (+6.2%) （+26） (+5.9%)

Mothers 275 10 3.6% 20 7.3%

（+3） (+0.8%) （+8） (+2.4%)

JASDAQ 725 22 3.0% 28 3.9%

（+9） (+1.4%) （+11） (+1.7%)

Total 3,621 1,025 28.3% 1,098 30.3%

（+316） (+8.2%) （+310） (+8.1%)

JPX-Nikkei 400 399 281 70.4% 288 72.2%

（+54） (+13.4%) （+49） (+12.1%)

* Based on disclosures on the status of response to the code in corporate governance reports submitted by companies by December 31, 2018. Change from July 2017 indicated in parentheses.

Number of Companies

Companies with two or more Independent Directors

Companies with 1/3 or more Independent Directors

Number Ratio Number Ratio

1st Section 2,099 1,916 91.3% 706 33.6%

（+138） (+3.3%) （+157） (+6.5%)

2nd Section 511 340 66.5% 121 23.7%

（+9） (+3.2%) （+23） (+4.9%)

Mothers 259 106 40.9% 81 31.3%

（+19） (+4.8%) （+12） (+2.6%)

JASDAQ 729 221 30.3% 105 14.4%

（+19） (+3.4%) （+13） (+2.2%)

Total 3,598 2,583 71.8% 1,013 28.2%

（+185） (+4.0%) （+205） (+5.3%)

JPX-Nikkei 400 399 390 97.7% 162 40.6%

（+8） (+1.7%) （+26） (+6.4%)

Appointment of Independent Directors

※ Figures for 2018 are based on the Corporate Governance Reports of listed companies as of July 13, 2018. Change from July 2017 indicated in parentheses.

22



Number of

Companies

Directors

Number of Independent Directors Number of Outside Directors

Average Average None 1 2 3 or more

1/3 or more

More than half

Average None 1 2 3 or more

1/3 or more

More than half

1st Section 2,099 9.17 2.46

15 168 1,170 746 706 67

2.68

7 106 1,037 949 877 103

0.7% 8.0% 55.7% 35.5% 33.6% 3.2% 0.3% 5.1% 49.4% 45.2% 41.8% 4.9%

2nd Section 511 7.77 1.82 22 149 261 79 121 11

2.16 5 107 254 145 181 22

4.3% 29.2% 51.1% 15.5% 23.7% 2.2% 1.0% 20.9% 49.7% 28.4% 35.4% 4.3%

Mothers 259 6.08 1.52 30 123 58 48 81 12

1.94 11 99 75 74 124 28

11.6% 47.5% 22.4% 18.5% 31.3% 4.6% 4.2% 38.2% 29.0% 28.6% 47.9% 10.8%

JASDAQ 729 6.88 1.19 164 344 158 63 105 7

1.63 59 330 213 127 190 26

22.5% 47.2% 21.7% 8.6% 14.4% 1.0% 8.1% 45.3% 29.2% 17.4% 26.1% 3.6%

Total 3,598 8.28 2.04

231 784 1,647 936 1,013 97

2.34

82 642 1,579 1,295 1,372 179

6.4% 21.8% 45.8% 26.0% 28.2% 2.7% 2.3% 17.8% 43.9% 36.0% 38.1% 5.0%

JPX-Nikkei 400

399 10.58 3.11

0 9 141 249 162 26

3.28

0 5 124 270 185 31

－% 2.3% 35.3% 62.4% 40.6% 6.5% －% 1.3% 31.1% 67.7% 46.4% 7.8%

Number of Outside/Independent Directors per Company

※ Figures for 2018 are based on the Corporate Governance Reports of listed companies as of July 13, 2018. Change from July 2017 indicated in parentheses.

※ An outside director that is designated by each listed company as an independent director under the TSE listing rules.



23

Market Cap. 1st Section Listed

Companies (Total) Financial Report

Corporate Governance

Report Others

(Ref.)Foreign Investor Ratio

(Average)

Total 2,130 583 160 272

16.69% 27.4% 7.5% 12.8%

Over 1 tri. 128 74 63 61

34.06% 57.8% 49.2% 47.7%

500bil.-1 tri. 111 50 27 41

29.68% 45.0% 24.3% 36.9%

100-500 bil. 447 183 53 106

23.69% 40.9% 11.9% 23.7%

50-100 bil. 333 92 9 33

17.80% 27.6% 2.7% 9.9%

25-50 bil. 363 72 8 17

13.44% 19.8% 2.2% 4.7%

10-25 bil. 463 73 ０ 11

9.47% 15.8% 0.0% 2.4%

4-10 bil. 243 36 0 3

5.90.% 14.8% 0.0% 1.2%

Less than 4 bil. 42 3 0 0

3.17% 7.1% 0.0% 0.0%

24

English Disclosure of the 1st Section Listed Companies




※ Based on the disclosures made on the English material distribution service in 2018

24

25

TSE NASDAQ LSE Deutche Boerse

Euronext NYSE Hong Kong

SGX

Name 1st

Section Global Select Premium Prime

Regulated Market

(Compartment A)

NYSE Main Board

Main Board

Concept ー

The highest initial listing standards of any exchange in the

world

Higher initial listing

standards

For international

investors

Market Cap. More than 10 bil€

Large & Mid Cap.

Companies

For Established Companies

For Established Companies

Number of companies

2,141 1,480 504 307 295 2,419 1,968 493

Junior market

492 （2nd

Section）

856 （Global）

346 (Standard)

147 (General)

225 (Compartment B)

ーーー

Market Cap. Medium

(JPY) 48. bil. 126.1 bil. 140.2 bil. 95.9 bil. 468.1 bil. 214.9 bil. 20.8 bil. 10.8 bil.

Market Cap. top 5% average

1.2 tri. 2.5 tri. 3.2 tri. 4.6 tri. 10.0 tri. 5.8 tri. 0.8 tri. 0.51 tri.

Market Cap. bottom 5%

Average 6.2 bil. 8 bil. 5.8 bil. 4.2 bil. 121.1 bil. 11.9 bil. 2.5 bil. 0.74 bil.

Upgrade Request for transfer Automatic ーーー

Downgrade Involuntary Request for transfer Automatic ーーー

Trading Value

（2018）

740 tri. 1,846 tri. 280 tri. 200 tri. 242 tri. 2,127 tri. 272 tri. 20 tri.

Main Markets of Global Stock Exchanges （Comparing to the 1st Section）

※ End of April 2019 and as of May 6, 2019

Market with Hierarchal Design No Hierarchal Design

Based on each exchanges’ public information



26

16 12 23 21 10 24 24 18 24

41 32

26 40 31

33 35 17

34

11 8 7

3

1

9 8

5

3

2010 2011 2012 2013 2014 2015 2016 2017 2018

Others Merger etc Stock consolidation

Number of Delisted Companies & TSE Delisting Rules

Item Main Market Mothers JASDAQ

Shareholders ４００１５０（※）１５０

Tradable Shares ２，０００ unit １，０００ unit（※）５００ unit

Tradable Market cap

0.５ bil. JPY 0. ５ bil. JPY（※） 0. ２５ bil. JPY

Tradable share ratio

５％５％－

Sales, Profit － (From 6th yrs. after listing)

If sales is less than 0.1 bil. JPY Negative CF for 5 yrs.

Market Cap １bil. JPY 0.５bil. JPY（※）－

Share price － Less than 1 % of offering price (for 3 yrs.

after listing) １０ JPY

Trading Volume １０ unit/month or No trade for ３ months －

Insolvency 2 consecutive auditing period

Others False Statement , Inappropriate M&A, etc.

Delisting Criteria

Number of delisting (calendar year)

※10 yrs. after listing the same standard as Main Market


Responses regarding the current state of exit from the market f. The exit criteria in alignment with market concept.

Green Sheet Issues （Phoenix Segment）

Phoenix Issues

Phoenix Issues Japan Securities Dealers Association operates Phoenix Issues as a

market place for delisted stocks However, after June 2016, there are zero issues registered as

Phoenix Issues

Trading Opportunities for Delisted Stocks

27

Based on JSDA’s public information

Total Number of Issues at the End of Each Year


Responses regarding the current state of exit from the market f. The exit criteria in alignment with market concept.


Section/ Age after listing


JASDAQ Growth

60 – 70 yrs 352

（16％）ーーーー

50 – 60 yrs 317

（15%） 108

（22%）ー

19 （3%）

ー

40 - 50 yrs 137

（6%） 14

（3%) ー

7 （1%）

ー

30 – 40 yrs 193

（9%） 12

（2%）ー

29 （4%）

ー

20 - 30 yrs 349

（16%） 32

（7%）ー

242 （36%）

ー

10 – 20 yrs 457

（21%） 92

（19%） 40

（14%） 304

（45%） 30

（81%）

5 -10 yrs 149

（7%） 139

（28%） 32

（11%） 26

（4%） 7

（19%）

Less than 5 yrs 187

（9%） 95

（19%） 214

（75%） 51

（8%）ー

Total 2,141 492 286 678 37

28 28

Distribution of Company’s Age After Listing on Each Market Segment



1. Issues Regarding the Current Market Structure （２）Insufficient Incentives for Sustainable Growth of Listed Companies

Responses regarding the current state of growth of corporate value after listing a. Growth of corporate value after listing

162

15 5 3

85

0

50

100

150

200

Less than 2 years 2 - 3 years 3 - 4 years 4 - 5 years More than 5 years

29

74

18

7 4

25

0

20

40

60

80

1年以上2年未満 2年以上3年未満 3年以上4年未満 4年以上5年未満 5年超 Less than 2 years 2 - 3 years 3 - 4 years 4 - 5 years More than 5 years

“Step-up” to the 1st Section

Length of time listed on the 2nd Section before market transfer to the 1st Section

# of Companies

Length of time listed on the Mothers market before transfer to the 1st Section

A total of 128 companies that initially listed on Mothers transferred to the 1st Section after the market integration in 2013 through 2018

A total of 270 companies transferred from the 2nd Section to the 1st Section after the market integration in 2013 through 2018

After listing on Mothers and the 2nd Section, companies step up to the 1st Section happens within less than 2 years

# of Companies


Responses regarding the current state of step-up b. Listing criteria for step-up

Mothers 10 Year Rule

Market Transfer to 2nd Section

In order to establish Mothers’ market concept as a market for high growth companies, after 10 years, 2 processes commence

Higher delisting criteria（same standard as the 2nd Section） Choose transfer to 2nd Section or continue listing on the Mothers（※）

Continued listing on the Mothers

※ In order to continue listing on the Mothers market, a company needs to explain that it still has high growth potential (except when the company has more than 4 bil. market cap.)

Every 5 years after continued listing on Mothers After 10 yrs.

Initial listing on Mothers

Mothers

（Market Selection by companies listed on Mothers (total #))

Market Selec-tion

After 10 years of listing on Mothers

Less than 10 years

（Ref） Market Transfer less than 10 years from listing

on Mothers

Market Selection to the

2nd Section

Continue listing on Mothers

Delisting Market Transfer to the 1st Section

Market transfer to the 2nd section

# of Companies

61 43 243 11 122 2

（Process after listing on the Mothers for 10 years）

30

Mothers （higher delisting criteria）

Market Transfer to 2nd Section

Continued listing on Mothers

※ As of end of April 2019


Responses regarding the current state of step-up b. Listing criteria for step-up

From 2nd Section

Transfer from Mothers Transfer from JASDAQ On the basis of trading volume On the basis of market cap.

# Shareholder ２,２００

Tradable

Share

# 20,000 unit

Market Cap. ２ bil. JPY ２ bil. JPY 1 bil. JPY 1 bil. JPY

Ratio ３５％

Trading Volume ２００ unit ２００ unit ーー

Market Cap. ４ bil. ４ bil. ２.５ bil ２.５ bil.

Business continuity ー An applicant has established its Board of Directors and operation for three years or more.

Shareholder Equity JPY 1 bil. or more (it must not be negative on a separate basis)

Amount of profit or Market Cap.

The following a. or b. must be satisfied.

(a) The total amount of profits in the last 2 years shall be at least JPY 0.5 bil. or more;

(b) The value of sales(recent 1 yr) is JPY10 bil. or more and the market cap. at least JPY 50 bil.

False statement or adverse opinion, etc.

• No false statement during the last 5 yrs

• The unqualified opinions or the qualified opinions with exceptions on financial statements,

etc. during the last 5 yrs

• The applicant shall not meet (a) or (b) below:

(a) The internal management report for the business year which ends during the recent 1 yr contains the statement that “assessment results will be refrained

from being expresses.”

(b) The internal management audit report for the business year which ends during the recent 1 yr contains

the statement that “no opinion will be expressed.”

• No false statement during the last 2 yrs

• The unqualified opinions or the qualified opinions with exceptions on financial statements, etc. during the last 2 yrs

• The audit opinion on financial statements, etc. for the business year which ends during the

recent 1 yr represents “unqualified opinion”, in principle

• The applicant shall not meet (a) or (b) below:

(a) The internal management report for the business year which ends during the recent 1 yr contains the statement that “assessment results

will be refrained from being expresses.”

(b) The internal management audit report for the business year which ends during the recent 1 yr contains the statement that “no opinion will be

expressed.”

31

Listing Requirement for Section Transfer (transfer to 1st Section)

※ Other requirements not listed would be applied, please refer to the listing rules for the complete list of requirements


Responses regarding the current state of step-up c. Inconsistencies of step-up criteria.

32

Listing Requirement for Section Transfer (transfer from 1st Section to the 2nd Section)

Recent Market Transfer

Year Number of Companies Reason

2010 ２ Insolvency

2011 ２ Insolvency

2012-2014 ０ー

2015 １ Insolvency

2016 １ Insolvency

2017 １ Insolvency

2018 0 -

※Each has a grace period

Item Minimum Standard

Shareholder 2,000（※）

Tradable shares Tradable shares：10,000 unit（※）

Tradable Market Cap：１ bil. JPY（※）

Market Cap. ２ bil. JPY（※）

Insolvency Negative Shareholders’ Equity （１yr.）

Trading Volume 40 unit

Market Transfer Criteria – Minimum Standard of Listing on the 1st Section


Responses regarding the current state of step-up d. Issues arising from tiered market structure

0.2

0.1

8.1

7.2

11.8

29.5

28.8

1.6

3.6

1.3

2.0

2.0

35.3

20.0

32.3

21.4

21.8

17.0

11.6

23.2

30.9

30.4

38.1

57.7

31.4

16.0

17.0

JASDAQ（736社）

Mothers（249）

2nd Section（515）

1st Section（2,075）

Total（3,575）

Govt. & Local Govt. Financial Institutions（※） Securities Companies Business Corporations Foreigners Individuals

（Shareholder Ratio）（Value）（2017）

Other than the 1st Section, retail investor is the largest shareholder type

33

Shareholder Ratio Per Market Segment

（※）City & Regional Banks, Trust Banks, Life Insurance Companies, Non-life Insurance Companies and Other Financial Institutions

Total value（664 tri. JPY）





1. Issues Regarding the Current Market Structure （２）Insufficient Incentives for Sustainable Growth of Listed Companies Responses regarding the current state of investors’ market participation

e. Absence of institutional investors who support growth after listing

Listed Companies’ Disclosure (Categories of disclosure)

Listed Companies’ Information Disclosure

34

Market Segment Category

1st Section

2nd Section

Mothers JASDAQ

【based Financial Instruments and Exchange Act】 Securities Report、Quarterly report、

Securities registration statement etc.

○ ○ ○ ○

【based on Companies’ Act】 Business Report、Financial statement etc.

○ ○ ○ ○

【based on Exchange rules】 Timely disclosure（Decided facts、

Occurred facts、Financial report・ Quarterly financial statement

(performance forecast etc/）

○ ○ ○ ○

Corporate Governance Report （Codes to be “Comply or Explain”）

○ （All）

○ （All）

△ （Basic

Principles only）

△ （Basic

Principles only）

Mid-term business rules －－－ ○ Growth

Explanation about the investment for the listed companies’ shares

－－ ○ ○ Growth


Responses regarding the current state of information disclosure framework etc. f. Burden of information disclosure etc.

35

Capital Raised After Listing

Not much capital is raised after listing, recently about 1% of total outstanding shares are related to capital raised

※As of the end of 2018 (excluding share split)

（Ref.）Listed shares：330.2 bil. shares （As of the end of 2018）

Public Offering ex. IPO

Subscription warrants and Stock Options Exercised

Mergers Third Party Allotment

Conversion of CB & Preferred Stocks

Increase in the outstanding shares of listed companies

Shareholder Allotment


Responses regarding the current state of incentive mechanism for growth after step-up. g. Lack of mechanism to incentivize sustainable growth after step-up

36

（Number of years after listing on the 1st Section & Size of Market Cap.）

Number of years after listing on the 1st Section & distribution of Market Cap.

8

6

3

6

2

1

4

5

35

35

29

54

29

10

11

35

28

231

48

36

118

84

36

24

68

39

453

43

21

79

73

33

21

55

47

372

25

25

68

64

47

26

46

40

341

19

20

93

66

45

43

79

92

457

4

5

22

12

10

2

16

47

118

5

7

20

15

10

9

14

54

134

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Less than 5 yrs.

5 - 10 yrs.

10 - 20 yrs.

20 - 30 yrs.

30 - 40 yrs.

40 -50 yrs.

50 -60 yrs.

60 - 70 yrs.

1st Section

1-4 bil. 4-10 bil. 10-25 bil. 25-50 bil. 50-100 bil. 100-500 bil. 500bil.-1 tri. Over 1 tri.

※ As of the End of April. 2019


Responses regarding the current state of incentive mechanism for growth after step-up. g. Lack of mechanism to incentivize sustainable growth after step-up

Country Japan（※） US Britain Germany China

Main Benchm

ark TOPIX Nikkei 225

Dow Jones

Industrial Average

(DJIA)

S&P 500

FTSE 100

DAX30 Shanghai Composite

# of Constitu

ents 2,141 225 30 500 100 30 1,241

Calculation

Method

Market Cap.

weighted average

Price Average Market Cap. weighted average

Index Universe

All 1st Section listed

Selected from 1st

Section listed

Selected from NYSE&

NASDAQ listed

Selected from LSE Premium

Selected from

Deutsche Boerse Prime

All Shanghai

stock exchange

listed

37

Main Benchmark

（※）Other index, such as JPX Nikkei 400 index (400 companies), MSCI Japan (322 companies) are selected from 1st Section as well as other market segments

1. Isues Regarding the Current Market Structure （３）No Index Currently Functioning Properly as an Investable Index

Documents

Comments Received from Market Participants in …...Comments Received from Market Participants in Response to the Review of the TSE Cash Equity Market Structure （Additional Material）